Question

U.S. based Majestic Co. sells products to U.S. consumers and purchases all of materials from U.S. suppliers. Its main competitor is located in Belgium. Majestic Co. is subject to:
Options:
O economic exposure.
O transaction exposure.
O translation exposure.
O no exposure to exchange rate fluctuations.

Answer 1

Answer:

Economic exposure

Explanation:

U.S. based Majestic Co. sells products to U.S. consumers and purchases all of materials from U.S. suppliers. Its main competitor is located in Belgium. Majestic Co. is subject to economin exposure.

Economic exposure, also known as operating exposure is the effect caused on a company’s cash flows due to unexpected currency rate fluctuations. Economic exposures are long-term in nature and have a substantial impact on a company’s market value. Majestic Co. having a competitor in Belgium can have unexpected currency rate fluctuations

Answer 2

Answer:

Economic exposure.

Explanation:

Economic exposure is also known as operating exporter is known as a phenomenon where a business's cash flow is affected by currency rate fluctuations. It occurs over the long term and affects product value.

Businesses protect themselves from economic exposure by operational strategies mostly through diversification, and currency risk mitigation strategies.

In this instance Majestic Co a United States company has a competitor in Belgium and so tend to be affected by foreign exchange fluctuations of the dollar to Belgium currency.